Stephen S. Roach, former Chairman of Morgan Stanley Asia and the firm's chief economist, is a senior fellow at Yale University's Jackson Institute of Global Affairs and a senior lecturer at Yale's School of Management. He is the author of Unbalanced: The Codependency of America and China.

Spending from capital gains, notional included, can hardly be a long term fuel for growth; on the other hand taxing this spend does not help and is non-existent as a policy, so where does it leave the fiscal side?

The unprecedented bailout of a government sanctioned corrupted banking system and a bias toward government spending was never envisioned as a Keynesian principle. If consumer confidence and by default consumer spending is a cornerstone of GDP growth, why are the main beneficiaries of the governments flawed QE policy, the wealthiest 10% of the population. Resumption of the status quo is not coherent fiscal policy.

But does it go far enough? QE is conventionally understood as inconsistent with declining fiscal deficits. Monetary expansion vs. fiscal contraction, blah, blah blah. But this assumes a closed economy.

However, because the American economy is wide open, QE and declining fiscal deficits should be understood as complementary means to the same end, which is to repair the nation's balance sheet. (By the way, under many conditions, as the Asians would tell us, low interest rates do not reduce but actually augment the household savings.)

So the US is like the EU, hellbent on thrift.

And who will assume the US's former role, "the consumer of the last resort?" If American consumption was not large enough to sustain world growth, neither is China, nor Japan, indeed, not even China + Japan.

What's the way out of this Hobbesian warre of thrifty sovereigns? Only pipedreams, perhaps: an International Clearing Union or, if that is insufficient, a world sovereign government. Then closed-economy macroeconomics would apply and monetary and fiscal policy might actually work.

For GDP to grow in real terms, at some point, all this "wealth" needs to find its way into capital and labor. There does not seem to be enough real growth opportunities for all this money, so it stagnates or pours into unproductive uses like housing or more consumption.

The current growth constraints, like climate concerns and weak infrastructure, education and basic research, can only be addressed by state or global action. Unfortunately, governments all over the world are not ready to address these, because there are no clear solution roadmaps.

Some of these problems, like climate change, are not even defined well enough to begin to solve. So everyone is patiently keeping their powder dry, while the interdisciplinary stagnation and confusion resolves itself into some self-organized flow.

I think it's been well-documented that the Fed recognizes its limitations in reducing inequality/unemployment. It regularly advocates for more fiscal-side policies to address our slow growth and anemic jobs recovery.

QE may be inefficient, but it still helps those who need help most on the margin, even if it has bigger benefits for the wealthy.

It should be clear by now that it doesn't matter who's in power, the levers are being controlled by the rich. Robert Reich's new movie opening this weekend, Inequality for All, could be an opportunity to start talking about inequality and the negative effects it has on all sections of society, including the rich - http://theendisalwaysnear.blogspot.com/2013/09/abhorrent-anniversary-gifts.html

Stephen you are on the money. I suspect Ed Milliband must share your views read this so he and the UK Lib Dems now propose to tax the rich on their assets by the introduction of a mansion tax on all houses over £2,000,000. The Central Bank is 1/2 of the double act and inflates asset values which the Treasury then taxes. I am not an economist and haven't done the numbers so don't know how much they expect to generate but it is a rather cumbersome, insidious and dishonest way to go about things

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